Know your rights: 3 tips for dealing with debt collectors

Jan 5, 2021

This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

Editor’s note: This is a recurring post, regularly updated with new information.

Forgetting about paying off a bill is one thing, but prolonged missed payments can turn into a serious burden. However, if you find yourself in a difficult financial situation, know that predatory practices to collect that payment is illegal. 

At TPG, we advocate for smart spending on credit cards, including paying in full to avoid interest on your balance. But it’s not always that easy — and unforeseen situations may arise, especially in light of the ongoing coronavirus pandemic

For more TPG news and advice delivered each morning to your inbox, sign up for our daily newsletter.

In a 2019 Consumer Financial Literacy Survey, one in four U.S. adults said there were instances where they did not pay their credit card bills on time. These late or missed bill payments can begin the process of credit card delinquency — and over time, could eventually lead to dealing with debt collectors. 

If you find yourself in the precarious position of dealing with a debt collector, what are some things that you should know? Let’s walk you through it. 

In This Post

What are debt collectors? 

(Photo by Shutterstock)
(Photo by Olivier Le Moal/Shutterstock)

Debt collectors are collection agencies, debt buyers and lawyers who regularly collect debts — from individuals like you — as part of their overall business. There are also dedicated companies out there that buy past-due debts from creditors and then attempt to collect them.

The assumption that debt collectors often use questionable — and sometimes even illegal — tactics isn’t wrong. The Consumer Financial Protection Bureau (CFPB), the agency responsible for financial consumer complaints, handled more than 75,000 debt collection grievances in 2019.  

Debt collection is among the most prevalent and notorious topics of consumer objections about financial products or services, according to the CFPB.

Related: A guide to credit card debt

Why do you have to deal with debt collectors?

There are a couple of possibilities here. The first is that a credit card issuer (or other creditor) may use its in-house debt collectors or even hire a debt collection agency to collect a past-due debt that you owe. Debts sent to collections can include things such as: 

  • Credit card
  • Car loan
  • Medical/hospital bills
  • Student loans
  • Mortgage payments

Another potential factor is a debt collection agency may purchase a past-due debt from a creditor at a discount in the hopes they can profit off of the transaction by receiving the full payment from you. 

Clearly, especially in the latter case, these collectors have a financial incentive to pursue payment — and sometimes that is done in a discriminatory or questionable manner. 

Related: From debt to over 20 credit cards: The story of The Points Guy’s personal finance journey

Tips on how to deal with debt collectors 

Woman managing debt
(Photo by Rawpixel/Getty Images)

1. Know your rights as an individual 

If you owe on a debt, it should be paid back. However, you should not have to tolerate practices that are meant to intimidate you into paying immediately. In 1977, Congress passed the Fair Debt Collection Practices Act to help you know when a debt collector has crossed the line. 

These collectors can’t harass you, lie to you or manipulate you in any way to get the debt resolved. The Federal Trade Commission has a full list of what debt collectors can and can’t do when it comes to collections. Know that abusive, unfair, or deceptive tactics are off-limits. 

You can report any problems you have with a debt collector to your state attorney general’s office, the Federal Trade Commission, and the Consumer Financial Protection Bureau.

2. Stay organized and get everything in writing

Make sure you know exactly what you owe and have that be clear at the onset from the creditor, not the debt collector. 

Don’t do anything once you get that initial call either. A collector also has to send you a written “validation notice” within five days of first contacting you. The notice has to say how much money you owe, the name of the creditor you owe it to, and what to do if you don’t think it’s your debt.

If you don’t think you owe any money, you should send a debt collector a letter asking for verification of the debt. If you send the letter within 30 days of getting the validation notice, the collector has to send you written verification of the debt — like a copy of a bill that you supposedly owe — before it can start trying to collect the debt again. 

3. Consider other options to repay

If at all possible, first try to work out an arrangement with your creditor before a bill is sent over to collections. 

Another option if you’re having difficulty with collections is to seek out a nonprofit credit counseling agency. They may be able to help work something out with your creditors in terms of a repayment plan. If it’s looking unlikely you’ll be able to pay back your debts, or if debt collectors are hounding you, you could try to request a free consultation with an attorney that specializes in bankruptcy.

Even if you decide not to file for bankruptcy, the attorney can tell you what a creditor is allowed to do — and what they can and can’t collect on. 

Bottom line

In an ideal world, by making all your monthly payments, you wouldn’t even have to get into a situation with debt collectors. However, if it’s already too late for that, it’s important to know your rights and how to spot predatory practices. Hopefully, with these tips, you can pay off what you owe, or at the very least get a better understanding of how to deal with debt collectors.

If you eventually become ready to apply for financial products again, take a look at our best secured cards and best beginner cards. Down the line, managing credit cards effectively can help you establish a better credit scoreprotect you from fraud and provide you the opportunity to earn valuable rewards.

Related: How to earn points and miles with fair to poor credit

Additional reporting by Benét J. Wilson

Featured photo by Sam Edwards via Getty Images

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.